Solar cells as far as the eye can see: In western China, huge parks in remote areas produce green electricity from solar energy for the energy-hungry country. The People's Republic is a leader in the industry, but the huge flood of panels is leaving the solar industry in other countries in the dark.

The Meyer Burger company recently closed its factory in Freiberg, Saxony, due to price pressure from China. Meanwhile, political Berlin debates unsuccessfully funding the industry, which is under pressure, while Beijing wants to set the course for China's economic future with green technology.

“The solar industry is basically solving three big problems at once that Beijing is trying to solve,” says economic analyst Jacob Gunter of the Merics research institute in Berlin, which specializes in China.

“First of all, it is a new growth engine. Second, China's increasingly dominant position in the global solar panel market is enormously geopolitically useful to Beijing. Third, it helps solve the problem through the decarbonization agenda.”

The sector is in a serious crisis

The world's second-largest economy invested in real estate for decades, accounting for about a fifth of economic output.

But the sector, with its heavily indebted corporations, is in a serious crisis and is slowing the economic engine. Large infrastructure projects also contributed to growth. However, the necessary bridges, highways and railway routes have already been built.

Therefore, large solar parks are an alternative, but with less impact, as expert Cheng Zhang explains. “Compared to investments in the real estate sector, the multiplier effect of this industry is still too small,” says the president of the China-Europe Forum for the Clean Energy Transition.

This means that those who invest in solar energy do not earn as much as in real estate. China has currently installed more solar panels in large-scale projects than all the countries in the world combined, Cheng says.

“Overcapacity has become an increasingly serious problem”

But now there are no buyers in China. Gunter says: “The bubble is already there. “Chinese solar panel manufacturers produce many more panels than can be consumed in China and indeed the world at the moment.”

The expert sees government policy behind this. Unlike electric cars, where consumers regulate demand, Beijing's industrial policy drives solar demand. “The big problem is that the bubble that has formed is not necessarily about to burst, but rather the level of overcapacity means that solar panel manufacturers in other markets cannot compete on price.”

According to Cheng, excess supply is also reducing companies' profits and even leading some to insolvency. “Overcapacity has become an increasingly serious problem,” she says.

But the Communist Party counts solar cells, batteries and electric cars among the so-called new quality productive forces. Behind this cumbersome term, which the State leadership developed based on the theory of Karl Marx, hide more or less all the high technologies in which China wants to become a leader.

Solar parks instead of cells on roofs

“Beijing has made clear that solar energy development will be at the top of the national strategy to drive China's energy transition, says Gao Yuhe, Greenpeace East Asia climate policy expert.

More and more companies see decentralized solar energy as an investment opportunity, also to use the energy themselves and release the excess to the grid.

In 2023, China will install many more solar modules. According to the Department of Energy, the newly added capacity was about 216 gigawatts, while about 87 gigawatts will be added in 2022. For comparison: According to the Federal Network Agency, Germany added 14.1 gigawatts in 2023.

China Industrial Association expects 2024
Photovoltaic with up to 220 gigawatts of newly installed solar energy. China is now installing more power in solar power plants rather than on the roofs of private or commercial buildings. The huge solar parks are located in areas with good radiation such as Xinjiang province or Inner Mongolia.

Why does China produce so many solar cells?

China wants to have reached peak carbon dioxide emissions by 2025, sooner than originally planned. But the People's Republic still produces 60 percent of its electricity from coal. This is also why Beijing is so massively pushing for the expansion of solar and wind energy, while countries like Germany are not moving fast enough with the expansion of wind energy. The People's Republic wants to be climate neutral by 2060.

But why does China produce so many more solar cells than it needs? On the one hand, Beijing wants to dominate the global solar market. But according to Gunter, an expert at Merics, the government also uses this technology as a deterrent.

Current US sanctions are keeping China away, for example, from important semiconductor technology. Solar panels are a kind of bottleneck that Beijing can close if the United States or Europe want to tighten their sanctions, Gunter explains.

Cheap solar cells raise concerns in Europe

Cheap solar cells from China are already fueling concerns about deindustrialization in Europe. In Germany, dependency could increase with the disappearance of Meyer Burger. One risk, according to Gunter: if solar panels can no longer be obtained from China due to a geopolitical crisis, a new solar industry would have to be created from scratch.

“This will seriously affect the autonomy with which its green agenda can be carried out,” he says. There is no need to disengage from China. “But I think a combination where China is allowed to produce 100 percent of the solar energy we need is unrealistic and naive,” she says.

Even experts from the highly respected Peking University have already drawn attention to criticism that China's overcapacity could affect the international trade order.

Economist Huang Yiping recently said at a forum that this should be taken seriously, as reported by several media outlets. According to him, if a wave of protectionism against Chinese products gains strength around the world, it could harm development, especially in terms of innovation.